Personal Income Tax -> Who pays tax in Canada

Who has to pay tax in Canada, and on what income?

Canadian residents

A person who is a resident of Canada is subject to Canadian income tax on their world wide income.

Are you a resident?

Whether or not a person is a resident of Canada is determined by many factors.  The amount of time spent in Canada is not the only factor considered.  Other factors include

A person who is a resident of Canada, and moves to another country, could still be considered to be a resident of Canada for tax purposes.  If you left Canada in the year to travel or live abroad, see the Canada Revenue Agency (CRA) guide T4131 Canadian Residents Abroad.

CRA has an Interpretation Bulletin, IT-221, regarding the determination of an individual's residence status.

For newcomers to Canada, some personal tax credits will be prorated based on the day you immigrated to Canada.

If you are a non-resident of or newcomer to Canada, see the following information on the CRA web site:

Non-residents and deemed residents

A person who is not a resident of Canada for any part of the year, and visits Canada for less than 183 days in a year, will pay Canadian income tax only on income earned from Canadian sources.

A person who is not a resident of Canada for any part of the year, but who visits Canada for a total of 183 days or more in a year, may be deemed to be a resident of Canada, and subject to Canadian income tax on their world wide income for the entire year.

Non-residents and deemed residents may or may not have to file a Canadian tax return.  Much Canadian source income will have had Canadian tax withheld when it was paid, and in many cases there is no requirement to file a Canadian tax return.  The most common types of income earned in Canada which are required to be reported on a Canadian tax return are:

When a non-resident or deemed resident files a Canadian tax return, they are taxed at the current federal tax rates, plus a surtax of 48% of the federal tax, unless income was earned from a business with a permanent establishment in Canada.  In this case, provincial or territorial tax is paid on that income.

Deemed residents and non-residents can claim the federal basic personal tax credit plus other applicable tax credits.  For non-residents, the non-refundable tax credits total is pro-rated, using a calculation based on income from Canadian sources divided by total world income.

For more information, see the CRA Income Tax and Benefit Package for non-residents and deemed residents of Canada.

When a non-resident disposes of certain taxable Canadian property, such as real estate, there are certain procedures to be followed, which include paying a tax of 25% of the gain on the property.  If this tax is not paid, the purchaser of the property will be liable for the tax, and thus may withhold 25% (50% in some cases) of the selling price of the property.  See disposing of certain types of property in the Canada Revenue Agency (CRA) guide T4058 Non-Residents and Income Tax for more information.

If a tax treaty exists between Canada and your country of residence, the terms of the treaty may reduce or eliminate the tax on some types of income.  You may be a deemed non-resident of Canada for tax purposes if you were a resident of Canada in the year, and, under a tax treaty, you were considered to be a resident of another country.  In this case, you will be treated as a non-resident for tax purposes.

Part-time residents

A person who is a resident of Canada for any part of the year is subject to Canadian income tax on their world wide income during the time that they are a resident of Canada.  During the time that they are not a resident of Canada, they will pay Canadian income tax only on income earned from Canadian sources.

See also Non-taxable Amounts.